Weinstein Co. Could Be Headed For Bankruptcy As New York AG Files Suit

New York Attorney General Eric Schneiderman filed a lawsuit yesterday afternoon against the Weinstein Company, headquartered in New York City, for alleged civil rights violations in the workplace. The company was in the process of being sold for $500 million, $225 million of which was to be assumed debt, to an investor group headed by Maria Contreras-Sweet. The deal has been halted as investigations proceed, creating tensions between the AG’s office and Contreras-Sweet’s group.

According to the lawsuit, Schneiderman launched the investigation after encountering published reports of Harvey Weinstein’s sexual harassment and discrimination of female employees at the company from 2005 through 2017. The suit claims that Harvey Weinstein had used his senior position to influence or deny career prospects to female employees or business partners based on their willingness to participate in sexual or demeaning behavior.

The Weinstein Company is accused of failing on multiple counts to protect its staff from the film executive’s misconduct. Employees were allegedly coerced into Non-Disclosure Agreements (NDAs), prohibiting them from divulging information related to workplace harassment and abuse in exchange for financial compensation instead of legal action. The company also allegedly mistreated the confidentiality of complaints, forwarding emails on to Harvey Weinstein. The board has denied the accuracy of these accusations in a public statement.

Schneiderman’s office is seeking financial reparations for victims, as well as oversight of new management hires and employment policies, and release of employees from their NDAs. Investors involved in the Contreras-Sweet deal expressed vexation at the suit, arguing that their acquisition of the company would have resulted in extensive corporate re-structuring — including compensation for victims and primarily female leadership — and that the suit jeopardizes the deal and these prospects.

Schneiderman is open to negotiations with the investors but claims that without the lawsuit, there would be no guarantee that the sale would result in adequate reparations. Since the company is disputing accounts of misconduct, insurance companies may not pay out claims to victims without legal action. However, if the sale falls through and a bankruptcy process inevitably unfolds, victim compensation would become increasingly difficult to obtain.

Bankruptcy would halt the prosecution of victims’ claims against the company, making compensation contingent on payment plans that the company develops based on their available funds. These payment plans can often be limiting or insubstantial for victims.

Prosecutors have not yet met with Contreras-Sweet’s group, and prospects of negotiations, as well as the future of the company, are unclear. The lawsuit follows in the wake of and shares parallels with another prominent sexual harassment case, in which the Wynn Resorts Board was sued for allegedly failing to address executive Steve Wynn’s reported sexual misconduct.